U.S. judge halts pipe­line

Bit­ter­ness and frus­tra­tion were the re­ac­tions from the Cana­dian oil in­dus­try after a U.S. judge or­dered a halt to the Key­stone XL pipe­line project un­til it passes fur­ther en­vi­ron­men­tal re­view.

The de­ci­sion on Thurs­day means longer de­lays in find­ing a way to drain a glut of oil in Western Canada that has driven price dis­counts to multi-year highs and stalled in­vest­ment, said Tim McMil­lan, CEO of the Cana­dian As­so­ci­a­tion of Pe­tro­leum Pro­duc­ers.

“It’s a vul­ner­a­bil­ity that we can’t con­trol and will cost us hun­dreds of mil­lions if not bil­lions of dol­lars as a na­tion and thou­sands of jobs,” he said Fri­day. “And the only rea­son it does have such a mas­sive im­pact on us is self-in­flicted wounds here at home on projects that could have given us re­silience against this sort of rul­ing.”

U.S. Dis­trict Judge Brian Mor­ris found Thurs­day that the po­ten­tial im­pact of Tran­sCanada Corp.’s $10-bil­lion pipe­line had not been con­sid­ered as re­quired by fed­eral law. En­vi­ron­men­tal­ists and Na­tive Amer­i­can groups had sued to stop the project, cit­ing prop­erty rights and po­ten­tial oil spills.

The judge, who was ap­pointed by for­mer pres­i­dent Barack Obama, is­sued a fed­eral court or­der block­ing a Trump ad­min­is­tra­tion per­mit for con­struc­tion of the pipe­line.

Tran­sCanada re­mains com­mit­ted to the project, spokesman Terry Cunha wrote in a brief email on Fri­day, adding the com­pany has re­ceived the judge’s rul­ing and is re­view­ing it.

The Cal­gary-based pipe­line com­pany’s shares fell by as much as 2.75 per cent in early trad­ing on the Toronto Stock Ex­change.

The set­back in the United States is a “wake-up call” that shows how im­por­tant it is for Canada to build pipelines such as the de­layed Trans Moun­tain ex­pan­sion to the West Coast that al­low ac­cess to other mar­kets, said Chris Bloomer, CEO of the Cana­dian En­ergy Pipe­line As­so­ci­a­tion.

“This im­pacts in­fra­struc­ture that’s mov­ing Cana­dian en­ergy. The im­pact is go­ing to be that we’re go­ing to sell our en­ergy at a dis­count,” he said.

The short­age of ex­port pipe­line space as oil­sands pro­duc­tion grows in Al­berta has been blamed for the re­cent widen­ing of the dif­fer­ence be­tween Western Cana­dian Se­lect bi­tu­men blend and New York-traded West Texas In­ter­me­di­ate to as much as US$52 per bar­rel, more than three times the typ­i­cal dis­count.

An­a­lysts say as much as 110,000 bar­rels a day of crude oil is cur­rently be­ing left in the ground in Western Canada rather than be­ing pro­duced and sold at un­prof­itable prices.

“This is the world’s long­est tug of war, with Western Cana­dian oil prices as the rope,” said Zachary Rogers, a re­fin­ing and oil mar­kets re­search an­a­lyst at Wood Macken­zie.

The judge’s rul­ing doesn’t kill the Key­stone XL project, he said in a re­port, adding he ex­pects the fight to con­tinue in the courts or lead to an ad­di­tional U.S. State Depart­ment re­view fol­lowed by Pres­i­dent Don­ald Trump ap­prov­ing the line again.

A spokes­woman for Nat­u­ral Re­sources Min­is­ter Amar­jeet Sohi said the Lib­eral gov­ern­ment was “dis­ap­pointed” by the Mon­tana court’s de­ci­sion.

“It is im­por­tant for good, mid­dle-class jobs in Canada and for a suc­cess­ful en­ergy ex­port mar­ket,” said Vanessa Adams. “The project has re­ceived all nec­es­sary ap­provals in Canada.”

The pipe­line has to op­er­ate within the hard cap Al­berta put on all oil­sands emis­sions and that cap is a crit­i­cal piece of Canada’s cli­mate change ac­tions, she added.

Con­ser­va­tive nat­u­ral re­sources critic Shan­non Stubbs said the Lib­er­als made a mis­take not seek­ing in­ter­vener sta­tus in the case orig­i­nally and they should work with U.S. of­fi­cials on an ap­peal.

CP PHOTO

Op­po­nents of the Key­stone XL pipe­line demon­strate on the Dodge Street pedes­trian bridge dur­ing rush hour in Omaha, Neb., on Nov. 1, 2017. A fed­eral judge in Mon­tana has blocked con­struc­tion of the $8-bil­lion Key­stone XL pipe­line to al­low more time to study the project’s po­ten­tial en­vi­ron­men­tal im­pact.